Executive summary

On 11 December 2025, the Governor gave assent as the final step to enact the Tax Credits Act 2025 (Credits Act) and the Corporate Income Tax Amendment (No. 2) Act 2025 (Amendment Act), as passed earlier in the month by the Bermuda Parliament. These Acts implement measures released for public consultation in September 2025 and introduce refinements relevant to multinational enterprise (MNE) groups operating in Bermuda.

The Credits Act retains the overall structure of the earlier consultation draft while incorporating numerous structural, definitional and administrative clarifications. The Amendment Act was enacted largely as proposed, with targeted additions to administrative provisions and enhanced integration with the new tax credit framework.

Multinational groups should review the enacted legislation, noting that some refinements were made to both pieces of legislation based on stakeholder feedback, to assess the implications for data, compliance, installments and modeling under the Bermuda corporate income tax (CIT) regime and the tax credits regime.

Background

In December 2023, Bermuda enacted a 15% CIT applicable to Bermuda Constituent Entities of in-scope MNE groups (see EY Global Tax Alert, Bermuda Parliament passes legislation to enact a 15% corporate income tax, dated 22 December 2023). Subsequently, the Government has released multiple consultations to refine the regime and introduce incentives designed to support local economic activity.

On 4 September 2025, the Government released the consultation draft of the Credits Act. (See EY Global Tax Alert, Bermuda releases consultation on substance-based tax credits, dated 23 September 2025).

On 12 September 2025, the Government released the second public consultation for technical amendments to the Corporate Income Tax Act 2023. (See EY Global Tax Alert, Bermuda releases second public consultation for CIT technical amendments, dated 19 September 2025).

Tax Credits Act 2025

The Credits Act establishes three tax credits beginning in fiscal years starting on or after 1 January 2025:

1. Substance-based tax credit
2. Community development tax credit
3. Utilities infrastructure tax credit

Though broadly consistent with the September consultation draft, the enacted Credits Act contains several notable refinements.

Structural changes and renumbering

A significant drafting change reorganizes certain provisions into separate standalone sections. As a result, section numbers have been renumbered and cross-references updated throughout the Credits Act. These changes enhance readability but do not change the underlying mechanics.

Refinements to definitions

The enacted Credits Act includes a substantial expansion and clarification of defined terms. Many concepts that appeared descriptively in the consultation draft now appear as defined terms, improving clarity and alignment with the calculation rules.

Job-based benefit component

Additional clarifications were made with respect to:

• Definition of eligible employees (expanded to include secondees and assignees, with detailed conditions relating to direction, control and tracking of payroll expenses)
• Qualified foreign assignments, including the 60-month and 12-month periods
• Eligible employees with multiple employers within a group

Long-term compensation awards

The final Credits Act includes additional guidance and amendments related to stock-based compensation and long-term incentive compensation, offering more granular calculation rules regarding plan requirements, exercise dates, vesting and performance periods and workday allocation periods.

Expense-based benefit component

The expense-based benefit component is now also limited by the transition factor; previously, the transition factor applied only to the job-based benefit component.

The enacted Act also introduces a notional rent rate of US$100 per square foot for the optional square-footage method to compute the Bermuda business premises expenses; previously, this concept was included but the amount was left blank.

Transition factor

Previously unprovided transition factors have been set at:

• 50% for fiscal years beginning in 2025
• 75% for fiscal years beginning in 2026
• 100% for fiscal years beginning in 2027

Utilities infrastructure tax credit

The enacted Act includes additional details on the scope of qualifying utility entities. Cross-references have been added to relevant Bermuda statutes governing electricity, communications and fuel distribution, clarifying which entities fall under Regulatory Authority oversight.

Administration and penalties

The Act includes several refinements intended to align administrative processes with those under the CIT Act. Notable changes include:

• Reduced severity of late-filing adjustments for credit claims
• Refined penalty provisions
• Right to appeal determinations to the Supreme Court

Corporate Income Tax Amendment (No. 2) Act 2025

The Amendments Act has been enacted substantially as proposed in the September consultation, with several additions to support administration of the CIT and the new tax credit framework.

Administrative updates

The enacted Act includes:

• An amendment to Section 46A authorizing the Agency to waive all or part of interest charges
• Amendments across the Act to reference tax credits from the Credits Act and grant the Agency authority to audit tax credit claims
• Revisions integrating tax credit amounts into the definitions of tax payments for penalty and enforcement purposes
• An amendment to Section 46D extending civil penalties to failures to provide information or documentation required by regulations

Implications

The adoption of the Tax Credits Act 2025 and the Corporate Income Tax Amendment (No. 2) Act 2025 represents another step in the evolution of Bermuda's tax and incentive landscape. The refinements made during the legislative process provide greater clarity but may increase data and tracking requirements for affected groups.

Multinational groups should evaluate the enacted legislation for impact on financial statement reporting and periodic installment payments.